Lost in translation: the tangled tale of Mt. Gox's missing millions

Japanese authorities are trying to unravel what happened at Mt. Gox, the popular Bitcoin exchange that collapsed last week, and recent revelations are only serving to thicken the plot, not clarify it.

"Like everything, it takes a lot of time to make something bulletproof," he said. "We cannot release something half-baked."

He acknowledged that Mt. Gox was struggling to cope with new users, which numbered as many as 20,000 a day that month. The company hired more staff to more quickly complete anti-money laundering identity checks on its customers.

"I would really like to stress that people trust us with a lot of money right now," Gay-Bouchery said. "We want to do everything by the book. We may appear slow in many aspects, but we are taking our time to do it right."

In June, Mt. Gox had cut off U.S. dollar withdrawals, prompting widespread concerns over its solvency.

The following month, around July 2013, Bitcoin entrepreneur Roger Ver visited Mt. Gox's Tokyo headquarters. He published a video saying he believed the company's withdrawal problems were caused by the "traditional banking system, not because of a lack of liquidity at Mt. Gox."

"The traditional banking partners that Mt. Gox needs to work with are not able to keep up with the demands of the growing bitcoin economy," Ver said at the time.

But on Feb. 25, the day Mt. Gox's website went blank, Ver retracted his earlier statements in another video.

In an email interview last week, Ver recalled his meeting with Mt. Gox: "I watched him [Karpeles] log into his online bank account in real time and saw the balances with my own eyes. They had a huge amount of U.S. dollar liquidity at that time."

Ver doubts that transaction malleability, a long-known issue that in some cases can be exploited to make fraudulent withdrawals, was the sole cause of Mt. Gox's wipeout.

"The problem was clearly caused by poor code or other mismanagement at Mt. Gox," Ver said.

"I think there was a lack of corporate culture," said a source close to the company who observed obliviousness to major problems. "I just really don't know how they managed to stay open as long as they did."

Spaghetti code "The environment was completely dysfunctional," said the company source, who worked at Mt. Gox owner Tibanne. "There was no testing or staging of code. Just development and production. It's a financial exchange and they're handling customer money. At least I would expect a workflow that encompasses these things."

Mt. Gox management ignored warnings that the software platform was "a spaghetti code mess" and showed little interest in cracking down on security flaws, the source said, adding that Karpeles grew bored of run-of-the-mill business tasks.

"Mark loved to circumvent the (development) process because he had direct access to all the servers," the source said. "So whenever he wanted to change something he would just change it on the live side, and that was that."